ACCT 212 Midterm Week 4
ACCT 212
ACCT212
ACCT 212 Midterm Week 4
Question 1
20 / 20 pts
(TCO 1) The Accounting Equation is used to develop the o
... [Show More] rganization's financial reports. (1) Describe what liabilities value would be if Assets are $50,000 and Owners' Equity is $25,000 by showing the Accounting Equation (10 points) and (2) provide an example of two liability accounts. (10 points)
Your Answer:
1. The accounting equation is Assets=Liabilities + Owners'Equity
$50, 000=L+$25,000
In order to find the liability value you will subtract the owners equity value from the Assets value.
Liabilities=$50,000-$25,000
Liabilities=$25,000
2. Examples of liability accounts are Accounts payable such as when a company purchases inventory or supplies on credit
Accrued Expenses such as utility payments are another example.
Textbook pages 11-12. Liabilities = $50,000 - $25,000 = $25,000. Notes Payable and Bonds are examples.
Question 2
20 / 20 pts
(TCO 1) The financial statements present a company to the public in financial terms. (1) Which financial statement should be prepared first and why (10 points), and (2) explain what information this financial statement provides. (10 points)
Your Answer:
1. The income statement of operations is the first to be prepared as itcompares the revenues and expenses for the specified period. The income statement reports revenues and gains as well as expenses and losses. We find the net income by subtracting the expenses from revenue. Net income is the most important item in a financial statement.
Textbook pages 15-21. Income Statement. Compares revenue to expenses.
Question 3
20 / 20 pts
(TCO 1) The accounting profession follows a set of guidelines for measurement and disclosure of financial information called the Generally Accepted Accounting Principles (GAAP). (1) Explain what the International Financial Reporting Standards (IFRS) are (10 points) and (2) provide an example of its application. (10 points)
Your Answer:
The International Financial Reporting Standards are accounting guidelines formulated by the International Accounting Standards Board. These Standards have been adopted by most countries across the world. The goal is to maintain stability and transparency throughout the financial world.
IFRS allows a company to report revenue sooner, so consequently, a balance sheet under this system might show a higher stream of revenue than GAAP's. IFRS also has different requirements for expenses; for example, if a company is spending money on development or an investment for the future, it doesn't necessarily have to be reported as an expense
https://www.investopedia.com/terms/i/ifrs.asp
Textbook pages 6-9. Standards that will make the global economy report using the same standards. The intention is to make raising capital easier for third-world businesses.
Question 4
20 / 20 pts
(TCO 2) Transaction analysis results in the development of a journal entry. In the start-up of a business, the owner contributes $750,000 of cash. (1) Name the accounts impacted and how to use the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points)
Your Answer:
We would see a debit to cash for $750, 000 and a credit to owners equity of $750, 000. You would see an increase in assets and owners equity. This would maintain a balance in the accounting equation.
Assets =Liabilities +equity
Textbook page 63. Cash/Debit/$750,000 and Owners' Equity/Credit/$750,000. Assets and Owners' Equity increase and the Accounting Equation is in balance.
Question 5
20 / 20 pts
(TCO 3) Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. At the beginning of the month, $1,350 of office supplies were purchased. There was not a beginning balance and the one purchase was the only one for the month. At the end of the month, $500 of supplies remained. Develop the adjusting entry. (1) Name the accounts impacted and how using the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points)
Your Answer:
Debit to supplies expense $1,350. Credits office supplies $1,350 the adjusting entry at the end of the month is debit to office expenses $850. Credit to to Supplies $850. The adjusting entry decreases assets by reducing the amount of supplies and owners equity would also decrease. Supplies account reduces the number of assets of the company and the debit to the supply account increases the total expenses of the company. The increase in the supply expense account reduces the net income. The reduction of office supplies reduces owner equity bringing the accounting equation in balance.
Textbook page 143. Supplies Expense/Debit/$850 and Office Supplies/Credit/$850. Assets and Owners' Equity decrease and the Accounting Equation is in balance.
Question 6
25 / 25 pts
(TCO 5) Internal Controls are required to safeguard assets and to ensure ethical business practices. (1) Identify and explain the reason for any two of the seven internal control procedures (10 points) and (2) provide examples of how your two selected internal control procedures will meet the goal of safeguarding assets and promoting ethical business practices. (15 points)
Your Answer:
The seven internal control procedures are smart hiring practices/separation of duties, comparisons and compliance monitoring, adequate records, limited access, proper approvals, information technology and safeguard controls.
Separation of duties is mostly used to prevent fraudulent activities and errors involving a company's assets. Keeping duties separate such as keeping the accounting department from the operating department helps to prevent employees the ability commit fraud.
Keeping adequate records will help to determine if fraudulent activity has been going on. Accounting records should be supported by either hard copy documents or electronic records. some examples of documents include sales invoices, shipping records, purchase orders and canceled checks. Keeping numbered sequenced documents that are complete can help to prevent theft. a gap in the numbered document sequence draws attention to the possibility that transactions may have been omitted from processing.
Textbook pages 238-239. The seven internal control procedures are smart hiring practices/separation of duties, comparisons and compliance monitoring, adequate records, limited access, proper approvals, information technology, and safeguard controls. Examples will probably come from graded discussions.
Question 7
25 / 25 pts
(TCO 5) The bank account as a control device helps to protect cash. One of the requirements is to conduct periodic bank statement reconciliations. Using the following data, complete the bank statement reconciliation. (Use the format shown on page 251 of your textbook.) (25 points)
Use the information below to prepare the bank reconciliation for Collier Cleaners for the month of September.
• The bank statement indicated bank service charges of $63.
• Outstanding checks as of September 30 amounted to $1,405.
• Deposits in transit as of September 30 amounted to $2,769.
• The ending balance per the September bank statement is $40,753.
• Collier Cleaners bookkeeper mistakenly recorded a $1,610 cash disbursement as $1,160 for Office Supplies on check #2402.
• The bank mistakenly recorded a deposit of $2,800 as $280 on February 17.
• The bank made an EFT payment on behalf of the company for Insurance for $3,200.
• Bank collected rent of $3,000 and a note, for $16,450, including interest of $450.
• The ending cash balance per the books for September before any adjustments was 28,900.
Your Answer:
Bank reconciliation for Collier Cleaners
09/31
Balance per book $28,900 Balance per bank $ 40 753
Add: ADD:
Rent Income $3,000 Deposits in transit $2,769
Notes Receivable $ 16,000 Bank error $2,520
Interest revenue $ 450 LESS:
Total $19450 Outstanding checks $ 1,405
LESS:
Book error ck#2402 $450
EFT insurance payment $3200
Service charge $63
Total $3,713
Adjusted Book balance $44,637 Adjusted Bank Balance $ 44,637
a.
Balance per book
28,900
Balance per bank
$40,753
ADD:
ADD:
Rent Income
3,000
Deposits in transit
2,769
Note receivable
16,000
Bank error
2,520
5,289
Interest revenue
450
19,450
LESS:
LESS:
Outstanding checks:
1,405
Book error #2402
450
EFT insurance payment
3,200
Service charge
63
3,713
Adjusted book balance
$44,637
Adjusted bank balance
$44,637
Quiz Score: 150 out of 150 [Show Less]